Question: A local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay

A local Pilates studio recently began offering a monthly subscription service for its patrons.

Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session.

Session

Willingness to Pay

1st $77

2nd $66

3rd $55

4th $44

5th $33

6th $22

Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the studio, per session, is constant at $11.

At a price of $60.50 per session, the number of sessions demanded by this consumer would be. At this price and quantity, consumer surplus is _______ and producer surplus is _____________ .

Suppose the studio has devised a new pricing scheme for consumers who demand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $222.75 and can have up to 6 sessions total.

Using this subscription pricing model, this consumer would demand ______ sessions. Under this scenario, consumer surplus is __________.

and producer surplus is ___________.

(Hint: For consumer surplus, consider how much total value the consumer places on all sessions, versus the total price, paid.)

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